Wednesday, January 5, 2011

Small Cuts in a Large Federal Spending Program?

According to this source, Federal government purchases were almost 8.1% of GDP during 2009. While the Republican Party tells us that they want to reduce the Federal deficit even as they cut taxes by reducing government spending, they typically rule out cuts in defense spending even that it was almost 5.5% of GDP during 2009.

Tony Capaccio reports that Defense Secretary Robert Gates is trying to get at least some control of defense spending over the long-term:

Gates, who plans to brief congressional leaders tomorrow, has received guidance from the White House that about $554 billion for defense, not including war spending, will be part of the budget that the administration will submit to Congress for the fiscal year that begins Oct. 1. That figure is $12 billion less than what the Pentagon planned, yet still allows for real growth over the fiscal 2011 budget, an analyst said. If implemented, the five-year cut would represent about a 2.67 percent reduction to what is a $2.99 trillion defense plan, not including war spending

This reporting ends with some appropriate cynicism:

Congress may add some of that money back in. An increase to $554 billion would represent growth of about 4.5 percent in nominal terms, or about 2.5 percent after adjusting for inflation, Daggett said.

Bet the bank that Republicans such as John McCain will lead the charge to adding back what little this Administration has decided to carve out of the original $3 trillion defense plan. We are not going to see significant reductions in overall Federal spending even if the new Speaker does push through his plans to have large cuts in small programs.

Why oh why do we allow this inept posturing and outright lying to continue? Transfer payments (or at least Social Security transfers) are separated from the rest of the budget for a very good reason. And that reason is to disallow the the use of the "unified budget" by Republicans lying about the growth of government and the total debt. The Social Security system has its own tax system ands its own revenue stream. It is "Off Budget" in order to disallow tinkering with it to fix deficit problems. That the US government which represents the "tax payers" owes money to the SS fund is no different from the US government owing money to the Chinese. It has _NOTHING_ to do with Social Security.

Trucker:Can you provide government citations to back up your points?If Social Security is separated from the rest of the budget, why is the unified deficit lower due to the surpluses?Owing money to the SS trust fund is very different from owing money to the Chinese.They even have different names for the types of debt.Owing money to the Chinese is owing money to an entity outside the federal government, debt held by the public.Owing money to the trust fund is debt owed within the federal government, intragovernmental holdings.The federal government considers debt held by the public as its strongest obligation to reapy.Intragovernmental holdings debt is considered the weakest of 4 levels of obligations to repay.The separation you refer to is only in an acountng sense.All of the FICA dollars go into the Treasury, just like all other revenues.I can provide governmental links and excerpts to back my statements for all who are interested.What can you provide other than your feelings, opinions, and desires?Don Levit